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Employment and Workplace Relations update: Top 5 issues arising from the Fair Work Act 2009

Nov 9, 2011

The Fair Work Act 2009 is now fully in force as of 1 January 2010. It applies to employers covered by the national system, which includes most employers in Victoria and many employers in other states who are constitutional corporations.

Here are the top 5 issues employers need to have regard to:

1. Fair Work Information Statement

The Fair Work Information Statement is a 2 page fact sheet that gives information about an employee’s rights and entitlements under the Fair Work Act.

From 1 January 2010, all employers must give new employees a Fair Work Information Statement (Statement) before, or immediately after the employee commences employment.

This is one of 10 minimum standards in the National Employment Standards (NES). There are significant penalties for failing to give a Statement to a new employee.

TIP 1: Make sure you are giving your new employees the Fair Work Information Statement.

2. Compliance with the National Employment Standards

Employees must receive at least the minimum entitlements set out in the NES. In summary the NES covers:

  • Maximum weekly hours of work – 38 hours per week, plus reasonable additional hours.
  • Requests for flexible working arrangements – allows parents or carers of a child under school age or of a child under 18 with a disability, to request a change in working arrangements to assist with the child’s care.
  • Parental leave and related entitlements – up to 12 months unpaid leave for every employee, plus a right to request an additional 12 months unpaid leave.
  • Annual leave – 4 weeks paid leave per year, plus an additional week for certain shift workers.
  • Personal/carer’s leave and compassionate leave – 10 days paid personal/carer’s leave, 2 days unpaid carer’s leave as required, and 2 days compassionate leave (unpaid for casuals) as required.
  • Community service leave – unpaid leave for voluntary emergency activities and leave for jury service, with an entitlement to be paid for up to 10 days for jury service.
  • Long service leave (LSL) – a transitional entitlement for certain employees who had certain LSL entitlements before 1 January 2010 pending the development of a uniform national long service leave standard.
  • Public holidays – a paid day off on a public holiday
    except where reasonably requested to work.
  • Notice of termination and redundancy pay – up to 4 weeks notice of termination (5 weeks if the employee is over 45 and has at least 2 years of continuous service) and up to 16 weeks redundancy pay, both based on length of service.
  • Provision of a Fair Work Information Statement – as outlined above.

Employers who breach the provisions of the NES face penalties of up to $6,600 for an individual and $33,000 for a corporation.

TIP 2: Ensure you are complying with the NES in practise and that your contracts and policies are updated accordingly.

3. Award Compliance

Over the last 2 years, the Australian Industrial Relations Commission has been undertaking a process of reviewing and rationalising industrial awards, with the result that more than 1,500 of the previous awards have been rationalised to make around 120 “modern awards”.

Modern awards commenced from 1 January 2010 and cover most businesses in the national workplace relations system. Modern awards contain various minimum terms and conditions such as minimum wages, overtime and penalty rates, leave loading and procedures for consultation and dispute settlement.

Many employers wrongly assume that they are “award-free” or that they pay their employees sufficiently to cover any award compliance issues. The consequences of getting it wrong are significant: penalties of up to $6,600 for an individual and $33,000 for a corporation, as well as compensation to employees for any underpayments.

Most modern awards contain transitional provisions which allow wages and penalty rates which are higher or lower than pre-existing conditions to be progressively introduced in 5 annual instalments from 1 July 2010. These transitional provisions are complex and advice may be needed to make sure that you are getting it right.

TIP 3: Know which modern awards apply to your business and how this affects pay rates and other conditions. Understand the effect of any transitional arrangements on pay rates.

4. Unfair dismissal laws and small business

Unfair dismissal laws now apply to all national system employers, including small businesses and their employees. However, there are special unfair dismissal arrangements that apply to small businesses that can simplify the dismissal process for small businesses.

A small business is one which employs fewer than 15 employees (up to 1 January 2011 this means 15 full-time equivalent employees). For small business there is:

  • a minimum qualifying period of 12 months instead of 6 months (employees can’t make an unfair dismissal claim in this 12-month period);
  • and a Small Business Fair Dismissal Code, which, if complied with, can provide a defence to an unfair dismissal claim.

Small businesses continue to be covered by other laws which may impact on their ability to terminate employees, such as unlawful termination provisions (e.g. can’t terminate on the ground of race) and contract law.

TIP 4: If you are a small business, make sure you properly review any new employees well within the first 12 months of employment. If considering terminating an employee, review the Small Business Fair Dismissal Code and obtain legal advice before making the decision to terminate.

5. Industrial instruments

Under the Fair Work Act there are a variety of instrument that can be used to obtain flexibilities, such as:

  • individual flexibility agreements (IFAs) which can be used to vary the terms of a relevant enterprise agreement or modern award;
  • guarantee of annual earnings, which can be used to remove certain high income earners from the operation of a modern award; and
  • enterprise agreements, which enable employers to reach a collective agreement with their workforce, including varying the operation of award terms.

There are numerous requirements under the Fair Work Act as to how these different instruments can be used and the processes for putting them in place. For example, employees must be better off overall under an IFA or an enterprise agreement as compared to the award.

Further, the new provisions in relation to bargaining in good faith have made the enterprise agreement negotiation process more cumbersome for some employers.

TIP 5: Understand the different instruments available to employers under the Fair Work Act. Give strategic consideration to which ones are right for your workplace. Obtain legal advice about the technical requirements relating to each one before making a decision to put in place a particular instrument.

More information

To discuss how the Fair Work Act 2009 will affect you, please contact a member of our Employment and Workplace Relations team on (03) 8600 8888.

Note: This update is a guide only and is not intended to constitute legal advice.